FORMER Iceland boss Malcolm Walker yesterday admitted he was aware of a fall in sales at the Deeside-based frozen food giant before he sold shares in the company worth £13.5m.

But he told the Daily Post he had done nothing wrong in offloading 4m shares because at the time he believed the company was still on target to achieve its profit forecast.

Mr Walker's admission came after the leaking of an internal memo dated October, and distributed under his name, indicating he had knowledge of a reversal in sales growth.

The note said it had not been a good year, and in the second half "sales have fallen off a cliff".

Three months ago, the then Trade Secretary Stephen Byers ordered an investigation to find out whether there had been any insider dealing in Iceland's shares.

Events at Iceland are also being probed by the Financial Services Authority.

The Iceland founder said yesterday: "I wrote the memo. It was certainly anything but secret, it was circulated to everybody in the company, and there was nothing unusual about it. It deals with daytoday trading and there is nothing in the memo that was new, original or surprising.

"It is important to differentiate here between sales and profits. The memo talks about sales. I knew what sales were and I knew there was a dip in sales. But I still believed we would make our profits forecast.''

Mr Walker sold the shares in mid-December when City optimism about the company had boosted its share price to 339p.

Within weeks Iceland issued the first in a series of profit warnings and its share price nose-dived, eventually sinking to a low of 141p.

A 15-month profits forecast of £130m late last year was slashed to just £40m earlier this year as the full impact of Iceland's disastrous foray into organic produce became evident.

Sales increased by 6pc in the six months to June and by 4.5pc in the nine weeks to early September. But, during the period from October to December last year, Iceland's sales fell by 5.3pc.

Mr Walker, who lives near Chester, founded the retail chain but resigned as chairman in the wake of the controversy over his share sale and the collapse in the value of the company.

Throughout, he has insisted he acted properly and will be cleared by the investigations.

Yesterday, he confirmed the leaked memo also contained comments about Iceland's in-store promotions such as buy one, get one free deals which were boosting apparent sales.

The memo said Bogof and promotional sales in general represented an ever increasing percentage of business and the company was under pressure from its auditors Ernst & Young over the way it recorded sales.

Iceland said yesterday it had no comment to make on the memo but confirmed it was co-operating with the inquiries.

Walker, who remains the largest private shareholder in Iceland, last month launched a rival frozen food operation called Cooltrader, in Wrexham, saying it would probably be the first in a small chain.